Fragrances & color cosmetics sees strong growth at Avon Q4

06 Feb '07

2 min read

Avon Products Inc reported that fourth-quarter 2006 total revenue rose 9% year over year (6% in local currency) to $2.6 billion. Active Representatives grew 5%, and units increased 2% versus the prior-year quarter.

Growth in sales of Beauty products in the quarter outpaced overall sales growth, at 11% in dollars and 7% in local currency. These results reflect growth in all categories, with the largest increases in the fragrance and color categories.

Fourth-quarter operating profit of $282 million was 5%, or $15 million, lower than the 2005 level. Operating margin was 10.8%, versus 12.4% in the prior-year quarter.

Andrea Jung, chairman and CEO, commented, "With 9% revenue growth in the fourth quarter, we continue to feel good about the progress we are making against our turnaround plan. Boosted by this strong quarterly performance, full-year revenue finished ahead of our expectations. The investments we are making in our business are clearly starting to deliver results," she said.

The 2006 fourth-quarter operating profit was unfavorably impacted by approximately $44 million of net costs to implement the current phase of the company's ongoing restructuring program, the most significant initiative being a previously announced realignment of Avon's North American distribution network.

The 2005 fourth-quarter operating profit was unfavorably impacted by approximately $56 million of costs to implement the initial phase of the company's restructuring program. The 2006 quarter also included approximately $42 million of incremental costs, related to the company's previously announced Product Line Simplification program.

In line with the company's turnaround initiative to improve brand competitiveness, fourth quarter 2006 included a $43 million, or 95%, increase in advertising, to $89 million. The increase supported new product introductions, such as Anew Clinical ThermaFirm and superFULL mascara, as well as Avon China's direct-selling launch.

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